The evolution of shareholder engagement: Boards take the lead

Shareholder engagement has evolved over the years. Earnings calls or meetings with investor relations were the primary form of engagement. More often than not, management took on the responsibility. But, we’re in a new era. Boards are leading the way. And, that’s a good thing. 

Investors are shifting their focus. Up until a few years ago, financials and the bottom line were the top concerns. There is much more to consider now – sustainability, diversity, cybersecurity and more. These are all issues that can impact businesses from performance to culture to talent retention and attraction. It is no longer just about the money. Boards are taking notice and are significantly increasing their interactions with shareholders. With the rise of shareholder activism and increased demand for trust and transparency, increased engagement is a welcomed change.

Transparent and honest conversations are a win-win on all sides. For boards that have not yet taken part in shareholder engagement, it may only be a matter of time. 

Here is what you need to know to get started.

Make your proxy statement work for you

Proxy statements are more than just compliance documents. They are effective tools for communication. Typically, management will take the lead in drafting and then get board approval. Being involved earlier in the process gives boards the opportunity to share input and shape documents before they are finalized. 

The proxy statement is the foundation for any conversation. An accurate and thoughtful proxy statement can give shareholders a clear-view into how the company and board operate. It can answer questions like: What are the board’s key oversight processes? How does the company’s executive compensation plan operate? 

Starting off with a transparent and well written proxy statement is one step towards building trust. By sharing proxy statements with shareholders ahead of time, it sets the stage for a productive conversation.

Take the time to prepare – and get the timing right

Engagement is top of mind when the annual shareholders meeting is right around the corner. For most companies, that is late-Spring – an extremely busy time for shareholders. Don’t put engagement off to the last minute. Take the time to prepare. Begin building that relationship ahead of time, so when you go into the season you've already set the groundwork.

To prepare, align on the agenda and share relevant materials. There is so much that can be discussed. Setting the agenda ahead of time will make for a more productive and efficient meeting. This will ensure everyone in the room is coming into the meeting with the same goals and have the background for an engaging conversation.

Accountability, accountability, accountability

Use this meeting to listen and hear firsthand shareholders’ concerns and take the feedback back to management. It may not be an easy conversation. That’s okay. Listening with an open mind will be important and extremely beneficial. Make the time to effectively follow up and hold yourself and management accountable for taking action against their concerns. This will be key for success.

When done well, actively participating in shareholder engagement can benefit the company greatly. Shareholders can speak candidly with boards to express potential concerns and share their perspectives. By clearly laying out their goals and expectations, it gives boards the opportunity to get ahead of activist requests and demands. After a transparent and honest conversation with shareholders, boards can work with management to set tangible actions. And with effective follow-up, accountability and open dialogue, boards can make strides in building trust.